Indian government bonds weakened in early trade on Wednesday, as oil prices extended gains on Middle East energy supply risks, though bargain buying limited the losses. Benchmark Brent crude rose 1.3% to a six-week peak at $92.2 in Asian trade, as fears of further supply disruptions intensified after U.S. forces struck Iranian military ‌targets for the ⁠11th ⁠straight night. Three oil tankers carrying Saudi crude for China and India diverted from the Red Sea, heading toward the Suez Canal, following warnings from Iran-aligned Houthi militia.India bonds slip on oil spike, bargain hunters curb lossesIndian government bonds weakened in early trade as oil prices extended gains. Rising crude prices could widen India's trade deficit and stoke inflationary pressure. Bargain buying and state-run bank bids limited the losses in the domestic bond market. Hopes of a peace deal and RBI foreign exchange measures aided sentiment. Traders await an update on India's inclusion in the Bloomberg Global Aggregate Index. U.S. Secretary of State Marco Rubio said on Wednesday the United States is still willing to negotiate an end to the Iran crisis but Tehran is not serious about talks. Rising crude prices could widen India's trade deficit ⁠and stoke inflationary ‌pressure. The benchmark 6.94% 2036 bond yield was up 1.5 basis points at 6.8078% by 11:50 a.m. IST. It settled at 6.7938% on ⁠Tuesday. Oil rally also pushed up U.S. Treasury yields, which could dent the appeal of riskier emerging market debt. The 10-year Treasury yield rose to 4.63% overnight, its highest level in two months. Value buying, however, helped limit losses in the domestic bond market. "Bids from state-run banks likely cushioned the fall, after the 10-year yield didn't rise past 6.83% at open," a private-bank trader said. Traders said hopes of a peace deal ‌between the U.S. and Iran in the near future and strong inflows from the Reserve Bank of India's foreign exchange measures aided sentiment. In the first update since ⁠the scheme's launch in early June, the RBI said its measures had mobilised $20.72 billion between June 8 and July 17. Traders also await an update on India's inclusion in Bloomberg Global Aggregate Index, as the index provider said one could come mid-2026.RATES Overnight index swaps rose as higher oil prices clouded India's macro outlook. The one-year swap was up 4 bps at 6.01%, the two-year rose 5 bps to 6.1850%, and the five-year jumped 4.25 bps to 6.48%.